Change agents
For eight months, French drugmaker Sanofi-Aventis SA steadfastly pursued Cambridge, Mass.-based Genzyme Corp. before finally winning over shareholders with a $20.1 billion deal in February. In that deal, Sanofi gained a steady inflow of revenue from Genzyme's portfolio of drugs for rare diseases, such as Fabrazyme to fight Fabry disease, a chromosomal disorder where the body can't break down substances like fatty acids. However, Sanofi was most attracted to Genzyme's pipeline, specifically its drug against multiple sclerosis.
That product, Lemtrada, is in many ways similar to other MS therapies. It tries to reduce the progression of disability in MS patients, who increasingly lose the ability to talk and walk as the disease tightens its grip. Those disabilities hit patients sporadically and patients often relapse. Multiple sclerosis drugs generally attempt to stymie those relapses.
Lemtrada, according to Phase 2 clinical data, was more effective than most. And it seemed to work with greater ease. While most drugs are injected in MS patients between one and five times per week, Lemtrada needed an intravenous infusion only twice a year.
Lemtrada was new and different and looked like not just the next generation of MS products, but the next evolution of MS therapy. If it proved innovative and effective, convincing doctors to prescribe it more frequently, the windfall to Sanofi could be substantial.
Innovative treatments such as Lemtrada have historically been one driver of pharmaceutical dealmaking (the other being, paradoxically, a lack of innovation), but it's particularly the case in MS, a market with 2.5 million patients worldwide and an estimated value of over $10 billion. Although it's a sector that's only 20 years old -- before that there was no drug against the disease -- science has made significant progress, with over a half-dozen approved therapies. "With all the flack that drug companies get, they've done a lot in 20 years," says Joseph Herbert, an associate professor in the department of neurology at New York University's Langone Medical Center who has published widely on MS.
Despite that progress, most current therapies have limitations. They can partly stem progression but can't cure the disease. They're difficult to administer: Most therapies require patients to inject themselves. And they have serious side effects. Some of the most effective treatments are also potentially deadly.
Yet science and business continue to press the MS frontier forward. Besides Lemtrada, experts expect newly emerging oral therapies to consume a large portion of the market. One pharma company believes it has a therapy that could even attack the cause of the disease itself, the gradual erosion of the protective sheath of the nerves, known as myelin. As innovation and R&D continue, dealmaking inevitably follows.
In the days before therapies were approved by the Food and Drug Administration, there were many ideas of what might help MS patients: diet, exercise, herbal treatments. Some believed taking a bath infused with metals could repair damage from the disease. Certain cancer treatments, including chemotherapy, were targeted at MS with some initial success. Still, nothing seemed to stick, and the disease persisted.
A breakthrough came only in the early '90s, when Berlex Laboratories, a Montville, N.J.-based subsidiary of Bayer HealthCare, and Emeryville, Calif.-based Chiron Corp., made a deal. Separately, the two companies acquired assets that allowed them to collectively develop an interferon, a class of natural proteins that play a number of roles in the immune system. Touted for its potential to treat MS (as it once had been for cancer), the so-called interferon beta-1b, now called Betaseron, was developed by Berlex and Chiron. The pair were racing against rivals, including biotech pioneer Biogen Inc., which had its own interferon, to develop the first MS treatment. (Biogen became Biogen Idec Inc. of Weston, Mass., in 2003 when it merged with Idec Pharmaceuticals Inc.)
Both groups were trying to enter a market with what seemed to be substantial value: upward of $500 million in estimated sales. That turned out to be low.
Betaseron became the first approved treatment in 1993. After sales proved substantial, bigger companies targeted Berlex and Chiron. Acquisitions of both companies left the majority of the rights to the drug with what is now known as Bayer HealthCare, a U.S. division of German pharma Bayer AG. For Bayer, the drug easily surpassed initial projections. In 2010, it accounted for $1.6 billion in sales. Through its acquisition of Chiron, Novartis AG has been allowed to sell an identical version of Betaseron. That drug has substantially smaller sales -- $124 million in 2010 -- and was primarily a way for Novartis to enter the MS market.
Betaseron was only the beginning. Companies with in-house MS treatments worked feverishly to obtain FDA approval, while others looked to acquire businesses with an MS pipeline.
Three years after Betaseron, Biogen won approval for its own interferon, Avonex, in 1996. With $2.5 billion in 2010 sales, Avonex is today the best-selling interferon, in part because it needs to be injected only once a week instead of Betaseron's three times.
Israeli generics giant Teva Pharmaceutical Industries Ltd. received FDA approval in 1997 for Copaxone, a once-daily injectable immunomodulator derived from an amino acid. Though not an interferon, Copaxone had similar if slightly better efficacy profiles than its sister drugs. Today, Copaxone pulls in roughly $2.2 billion.
One other interferon, Serono SA's Rebif, was approved in the U.S. in 2002. Knowing its potential, German-based Merck KGaA paid $13.1 billion for Serono in 2006. Rebif's sales top $2.2 billion.
The most innovative of the first generation of MS treatments was also the last to receive approval: a once-a-month infusion therapy called Tysabri. Biogen and Dublin-based Elan Corp. plc began collaborating on Tysabri in 2000, and it won FDA approval in 2004. It immediately had safety problems. Some patients who took the drug, a monoclonal antibody, died from a viral infection in the brain. Tysabri was briefly pulled, but the FDA eventually changed the label to warn of the infection. In 2007, the FDA allowed it back on the market because it appeared to work better than most.
Though Tysabri has risks, it remains the most effective treatment for patients with more aggressive MS, says NYU's Herbert. When interferon or Copaxone are not effective, physicians turn to Tysabri in increasing numbers. In the first half of 2011, Tysabri generated revenue of $533 million, compared to $438 million in the same period of 2010.
The spoils of innovation
MS treatments and their owners |
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| Name of drug | Primary owner | Partner/ Secondary owner |
Developed by | Type of drug | Administration | Annual revenue ($M)/ Phase of development |
| Ampyra | Acorda Therapeutics Inc. | Elan Corp. plc | Elan Corp. | chemical formulation | oral | $133.1 |
| Avonex | Biogen Idec Inc. | NA | Biogen Idec | beta interferon | once-a-week injectable | 2,518.4 |
| Betaseron | Bayer HealthCare | Novartis AG | joint venture by Cetus Corp. and Triton Biosciences Inc. | beta interferon | injectable, three to four days a week | 1,600.0 |
| BG-12 | Biogen Idec Inc. | NA | Fumapharm AG | dimethyl fumarate, a type of fumaric acid | oral, twice daily | Phase 3 |
| Copaxone | Teva Pharmaceutical Industries Ltd. | NA | 1950s research of Michael Sela and Efraim Katzir at Weizmann Institute of Science | glatiramer acetate | once-daily injectable | 2,200.0 |
| Extavia (same drug as Betaseron) |
Novartis AG | Bayer HealthCare | joint venture by Cetus Corp. and Triton Biosciences Inc. | beta interferon | injectable, three to four days a week | 124.0 |
| Gilenya | Novartis AG | Mitsubishi Tanabe Pharma Corp. (Yoshitomi Pharmaceutical Industries Ltd.) |
Mitsubishi Tanabe | amino acid derived from fungi | oral, once a day | 138.0 1 |
| Laquinimod | Active Biotech AB | Teva Pharmaceutical Industries Ltd. | Active | synthetic immunomodulator | oral, once a day | Phase 3 2 |
| Lemtrada (alemtuzumab) |
Sanofi SA | NA | Herman Waldmann and colleagues at Cambridge University | monoclonal antibody | infusion, once a year | Phase 3 |
| Rebif | Merck Serano SA (Merck KGaA) |
NA | Ares-Serono SA | beta interferon | injection, three days a week | 2,200.0 |
| Tysabri | Biogen Idec Inc. | Elan Corp. plc | Athena Neurosciences Inc. | monoclonal antibody | infusion, every four weeks | 900.2 |
| NA = Not Available 1 first half 2011 2 failed to meet endpoint Source: The Deal Pipeline |
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Interferon drugs such as Betaseron, Rebif or even Copaxone work for about 50% to 60% of early-stage patients, helping reduce relapses and stemming disability, Herbert says. That means patients don't need to tempt fate with the sometimes-riskier Tysabri. But even when the drugs do work, patients who experience side effects often ask physicians to prescribe something else. Asking does not mean receiving. Because there hadn't been a new drug since Tysabri in 2004, options were limited.
That changed dramatically with the advent of oral treatments for MS. Since the first marketable therapies for MS surfaced, patients have had to wrestle with treatment regimens that are unpleasant and, for some, difficult. Most therapies require anything from daily to once- or twice-weekly dosages that are almost exclusively self-administered. That's why there has been so much interest in oral treatments, in which a patient can pop a pill once or twice a day instead of wielding an inch-long needle.
The big question: How safe are these oral therapies? Though data is available from clinical trials, only one treatment has been approved by the FDA. Some doctors and patients are holding back, Herbert says. "I think many people in the field are proceeding cautiously, and using [oral treatments] now only in circumstances where patients have failed or cannot tolerate injection or infusion." If they do prove equal to or better than injections, Herbert says oral treatments could grab the bulk of market share.
The MS market has thus girded itself for the possibility of technological transformation. Novartis of Basel, Switzerland, was the first to receive FDA approval for an oral drug, Gilenya, in September 2010. So far, it has beaten analysts' estimates, generating $138 million in sales through the first half of 2011.
It could soon face stiff competition from Biogen Idec, however. The company's oral treatment, BG-12, so far has a better safety profile, Herbert notes, with Gilenya associated with a drop in heart rate. "If and when it comes to market, it continues to look safe in the postmarketing era, then BG-12 might be a huge success because Gilenya is still associated with some annoying issues," he says.
Both oral products were acquired through deals. Gilenya came to Novartis through a licensing agreement in 1997 with Japan's Yoshitomi Pharmaceutical Industries Ltd., which would eventually become part of Mitsubishi Tanabe Pharma Corp. Mitsubishi Tanabe still retains global royalties outside Japan, where it splits marketing rights with Novartis.
Biogen picked up BG-12 in 2006 by buying Fumapharm AG, a Swiss pharma, after the companies had partnered on early-stage development of the drug. As part of the acquisition, Fumapharm gets milestone payments based on BG-12 sales. More dealmaking is possible for other potential oral treatments.
For years, Teva has been trying to bolster its MS pipeline with an oral treatment. But the company said in early August that its candidate, a compound called laquinimod, failed to reduce relapses more than a placebo, the key goal of a late-stage Teva study. The company pledged to keep working on the drug. But even if Teva gives up on laquinimod, another company could try its hand.
Actelion Pharmaceuticals Ltd., Europe's largest biotech and a perennial acquisition target, also has an oral MS therapy entering Phase 3. Allschwil, Switzerland-based Actelion released mostly positive Phase 2 results in August, and is considering a partnership. Analysts say big pharmas such as GlaxoSmithKline plc or Sanofi could be interested in Actelion's MS therapy.
Sanofi has every reason to make a move. An oral therapy would not only diversify its MS portfolio, but it could calm investors spooked by recent Lemtrada news. Sanofi in mid-July released initial results from its first Phase 3 clinical trial of Lemtrada that were positive, but not as good as Sanofi had hoped. More positively, it reached its first clinical endpoint of patients having a better relapse rate than they did on Rebif. On the negative side, it missed the second endpoint of stemming disability.
Sanofi remains optimistic. The second Phase 3 trial could prove greater efficacy, helping Lemtrada live up to expectations stirred up by the big Genzyme deal.
Whether or not Sanofi diversifies its MS product line with an oral treatment, it would yet not come close to being the most diverse MS company. That title would still fall to Biogen Idec. In addition to having the largest share of MS revenues -- more than $3.5 billion in 2010 -- Biogen has a long pipeline of potential MS candidates. Beyond its two approved drugs to prevent the disease and BG-12, Biogen has two more now in Phase 3, a promising partnership with a biotech and a potential "game changer" in Phase 1 trials. "Looking forward to innovations that we're not even aware of in MS, Biogen would be the first one you would think of," says Morningstar Inc. analyst Karen Andersen.
Biogen and partner Acorda Therapeutics Inc. of Hawthorne, N.Y., received conditional European approval in July to market a drug that improves walking in MS patients. Biogen has marketing rights outside the U.S. for the drug, known as Fampyra. Analysts forecast over $200 million in sales in coming years. Though it's small compared with Biogen's blockbusters, Fampyra still accounts for decent revenue. Acorda, which receives royalties from Biogen, has been cited as a potential acquisition target because the therapy is approved in the U.S. and Europe. To stem royalty payments and keep the revenue for itself, Biogen has been suggested as a logical buyer.
Biogen has shown interest in making further deals, though it could grow MS organically. One of its two Phase 3 candidates, daclizumab, is another monoclonal antibody that may be more efficacious than certain interferons. Daclizumab is being developed with Abbott Biotherapeutics Corp., a unit of Abbott Park, Ill.-based Abbott Laboratories. Biogen and Abbott released positive Phase 2 results in early August for daclizumab, showing the drug appears to have a better rate of relapse reduction than most interferons, though lower than that for Tysabri.
The other Phase 3 candidate is meant to enhance the effects of interferon drugs, thus reducing the need for frequent dosing.
Biogen is particularly touting the potential of its Phase 1 candidate, known as anti-LINGO-1. The drug, a protein, attempts to aggressively combat MS rather than stem its effects. The degradation of the myelin in MS hampers the ability of nerves to communicate with the brain. Anti-LINGO-1 tries to prevent myelin breakdown or stimulates remyelination.
"It's pretty exciting times around here," says Doug Williams, Biogen's R&D chief. "What we're doing is putting together a collection of drugs that can address the independent needs of patients out there." The company, he says, plans to diversify beyond MS, into a more broadly defined neurology company.
That diversification, in addition to its MS pipeline and $4.7 billion in revenue, has made Biogen an acquisition target. Williams says Biogen thinks more about building for the long term than getting taken out. But there's little you can do when success creates vulnerability.
MS drugs can be costly, ranging from $15,000 to $45,000 a year. Though the patient population is limited to about 2.5 million, those prices all but guarantee substantial revenues. "I think what's so appealing about a company like Biogen is the multiple sclerosis space has just become so attractive," says Morningstar's Andersen. "It's a prototype of these niche drugs that serve a relatively small number of patients on a chronic basis."
As innovation continues, Herbert says, M&A is likely to follow. That's not to say that older methods of treating MS will disappear. More effective, easier-to-use oral treatments will likely replace a substantial portion of injectable sales -- but injectables will retain a role, particularly for patients that have shown good results and safety from them.
Plus, it's difficult to say how the market could shift, mainly because innovation remains anyone's guess. "One always has to say, you can never be so smart to know what's coming down the pipeline," Herbert says.